Economics Final Exam
Review
ARE YOU READY?
1. Economics
• The study of the choices people make to
satisfy their needs and wants
2.
Factors of production – the resources
used to make goods and services
• Capital: a man made good used to produce or sell another good
• Entrepreneurship: person who combines the other three factors of
production to create a product
• Land: natural resources
• Labor: physical and mental effort used to make goods or services (human
work)
3. Scarcity
• Basic economic problem
4. Needs
• Necessary for survival
• 4 Basic needs:
• Water
• Basic food
• Basic clothing
• Basic shelter
5. Wants
• Things we buy to satisfy our impulses
6. Opportunity cost
• what you give up, the next best alternative use
of a resource
7. Productivity
• the level of economic output that results from a given level of
input.
• Henry Ford – developed the assembly line for automobile
manufacturing which drastically reduced the number of workers
required to build a car by making each worker more productive
8. Traditional economy
• basic economic questions are answered by tradition(the
past), ritual and custom
• Amish are an example in America
9. Pure command
• the basic economic questions are
answered by the government
10. Pure market
• the basic economic questions are answered by
individuals
11. In reality…
• ALL economies are mixed
12. Authoritarian Socialism
• Closest to pure command – goal is economic security – lack of
worker incentive
• Basic economic questions are answered by government planners
• Cuba, China, North Korea and the former Soviet Union are good
examples
13. Democratic Socialism
• major industry is owned by government – people
are free to buy and sell all other product – goal is
equality – lack of worker incentive – heavily taxed
14. Capitalism – Free enterprise
• closest to pure market – goal is economic freedom
• Government involvement is most limited
• Individuals answer the basic economic questions
15. Self interest motive
• people are interested in their own well
being will do what is best for themselves
16. Private property right
• individual right to buy and sell their own
property, as well as own however much
they want
17. Free enterprise system
• synonymous with Capitalism - based
heavily on the ownership of private
property
18. Sole Proprietorship
• A business owned and operated by one
person is called _______?
19. Specialization
• An advantage of partnerships is that specific duties
can be assigned to different partners, depending on
the partners’ skills and talents. The economic term
for this practice is called______?
20. Product Differentiation
• How do sellers in a monopolistic market
set their products apart?
21. Chief Executive Officer (CEO)
• In any corporation, the most important
decision maker is the_______.
22. Corporation
• The business structure that is legally distinct from
its owners is the _______.
23. Benefits for consumers of a competitive
market
• Cheaper prices
• better quality products
• more choice
24. Characteristics of a noncompetitive
market
• High Prices
• Not a quality product
• Not as many choices
25. Disadvantages of a sole-proprietorship
• Unlimited liability
• 100% Responsible
• Limited life
26. Disadvantages of partnerships
• Unlimited liability
• 100% Responsible
• Limited life
27. The major differences between perfect
competition and monopolistic competition
•Product Differentiation
28. Geographical monopoly
• Monopoly that is caused by location
(town in Alaska, mountaintop village)
29. What is a merger?
• Joining together of two or more
companies.
30. Natural monopoly
• Monopoly caused by a economy of
Scale(not enough people to support more
than one company)
31. Partnership
• 2 or more people who start a business
32. Price war
• Under cutting a competitors price to
out sell them
33. Technological monopoly
•A patent or copyright
34. What kind of monopoly often provides
basic necessities, such as public utilities?
•Governmental
35. Non-profit
• type of business organization does not focus
on financial gain for its members
36. Anti-trust legislation of the late 1800’s
•To break-up monopolies
37. Oligopoly
•market structure is dominated
by a few large sellers
38. Demand schedule
• Should be able to fill one out - table that lists
the quantity of goods that consumers are
willing and able to buy at a series of possible
prices
39. Demand curve
• Should be able to graph increase demand & decrease
demand - visual plot that reflects the quantity of goods
that consumers are willing and able to buy at a series of
possible prices
40. Substitution effect
• tendency of consumers to buy a similar, lower
priced product when a product becomes relatively
more expensive
41. Demand
• not about price – behavior – consumer standpoint amount of a good or service that consumers are willing
and able to purchase at various prices during a particular
time period
42. Quantity demanded
• – 0nly thing that changes it is price – will have to graph
an increase and decrease - amount of a good or service
that a consumer is willing and able to buy at each
particular price during a given time period
43. TIMER
• Non-price factors (determinants) that can cause
shifts in the amount of a product that is demanded
44. Elastic demand
• More horizontal - degree to which a small increase in
price causes a large decrease in quantity demanded, or
degree to which a small decrease in price causes a large
increase in quantity demand
45. Substitute good
• good used to replace another good
46. Complementary good
• Good used with another good
47. Inelastic demand
• More vertical - Good when a small change in price
has little effect on quantity demanded
48. Supply schedule
• - Should be able to fill one out - table that lists the
quantity of goods that producers are willing and
able to offer at a series of possible prices
49. Supply curve
• Should be able to graph increase demand &
decrease demand - visual plot that reflects the
quantity of goods that producers are willing and
able to offer at a series of possible prices
50. Supply
• not about price – producer standpoint - amount of
a good or service that producers are willing and
able to offer at various prices during a particular
time period
51. Quantity supplied
• 0nly thing that changes it is price – will have to graph an
increase and decrease - amount of a good or service that
a producer is willing and able to offer at each particular
price during a given time period
52. NPD of supply
• Determinants of supply- Non-price factors that
can cause shifts in the amount of a product that is
supplied
53. Elastic Supply
• More horizontal - degree to which a small increase in
price causes a large increase in quantity supplied, or
degree to which a small decrease in price causes a large
decrease in quantity supplied
54. Costs of production
• Fixed cost • production costs that do not change as the level of output changes
• Variable Cost • change as the level of output changes
• Total Cost –
• The sum of the fixed and variable production costs
• Marginal costs –
• are the additional costs of producing one more unit of output
55. Subsidies
• payments to private businesses by the
government
56. Taxes
• required payment of money to the
government to help fund government services
57. Equilibrium
• when quantity demanded equal quantity supplied
• QD = QS
58. Disequilibrium
• when quantity demanded does not equal quantity
supplied
• QD ≠ QS
59. Surplus
• when quantity demanded is less than quantity
supplied
• QD < QS
60. Shortage
• when quantity demanded is more than quantity
supplied
• QD > QS
61. Price Ceiling
• Max price charged for a good or service
• Rent control
62. Price floor
• minimum charged for a good or service
• Minimum wage